Mexico Inflation

Mexico: Inflation drops in March, returns to target range

April 9, 2014

In March, consumer prices added 0.27% over the previous month. The reading came in slightly above the 0.25% rise observed in February but fell short of the 0.30% increase expected by the markets. According to the National Statistics Institute (INEGI), higher non-core prices, particularly for agricultural products were the main drivers behind the monthly increase.

Annual headline inflation fell from 4.2% in February to 3.8% in March, which marked the lowest level since November 2013. As a result, inflation returned to the Central Bank's inflation target of 3.0% with a 1.0% tolerance margin. Core consumer prices, which do not take into account prices for fresh food, fuels and regulated prices, increased 0.21% over the previous month (February: +0.28% month-on-month), driving annual core inflation to 2.9% in March (February: 3.0% year-on-year).

The Central Bank (Banxico) expects that by the end of 2014, inflation will close the year below its 4.0% target ceiling. For 2015, the Banxico expects inflation to end slightly above its target of 3.0%. LatinFocus Consensus Forecast panelists expect inflation to end 2014 at 3.8%, which is up 0.1 percentage points over last month's forecast. For 2015, the panel sees year-end inflation at 3.4%.

Author:Ricardo Aceves, Senior Economist

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